The Fed looks through market volatility and starts normalisation

En bref

“The committee is of a mind to raise the federal funds rate at the March meeting assuming that conditions are appropriate for doing so.”: chair Powell could hardly have been more straightforward on a decision that was anyway widely expected. Moreover, he hinted several times that the previous experience of policy normalisation is a poor guidance to the Fed’s projected path.
Market CommentaryCommentaries & InterviewsMarket Commentaries

Highlights:

  • A rate hike in March is a done deal. The better economic situation compared with 2015 will allow a faster with-drawal of monetary stimulus. This implies for us four hikes this year, with risks tilted to more increases, but 50 bps moves have not been ruled out. Balance sheet reduction will begin in July at the earliest, as it will take at least two meetings for the FOMC to define the details. Predictability remains the byword.
  • Full employment has been reached, and the extremely strong labour market, indicates according to the FOMC that the economy can tolerate a fast pace of support reduction. Risks remain two sided, but Powell tended to concentrate on the upside ones for inflation, as supply bottlenecks will persit until next year.
  • The hawkish message lifted the 2-year yield to where it was before the pandemic (1.09%) and hurt stocks. The FOMC does not appear worried about the recent market turmoil and believes that the tightening in financial con-dition just reflects the market revising expectations in line with what the Fed sought with the December hawkish pivot.

Download the full publication below

The Fed looks through market volatility and starts normalisation
Picture

© Generali Investments, tous droits réservés. Ce site internet est publié par Generali Investments et est considéré comme une communication marketing et une promotion financière liée aux produits et services des sociétés du groupe Generali suivantes : Generali Investments Partners S.p.A. Società di gestione del risparmio, Generali Insurance Asset Management S.p.A. Società di gestione del risparmio, Generali Investments Luxembourg S.A. et Generali Investments Holding S.p.A. (ci-après dénommées ensemble Generali Investments). En outre, le site peut contenir des communications de marketing et de promotion financière de produits et services de sociétés faisant partie de la plate-forme Multi-Boutiques coordonnée par Generali Investments Partners S.p.A. Società di gestione del risparmio, et en particulier de Generali Global Infrastructure, Sycomore Asset Management, Aperture Investors LLC, Plenisfer Investments SGR, Lumyna Investments et Generali Real Estate S.p.A. Società di Gestione del Risparmio.